Top 8 XERO Mistakes to Avoid for Smoother Operations

Xero has made managing your accounts hassle-free and is helping small firms do business with their clients locally and globally. Xero’s cloud-based accounting software has helped small businesses build a better relationship with their clients through online collaboration. However, as an easy-to-use software, Xero can nevertheless be a bit challenging at times if you’re new to it.

We have compiled a list of common mistakes made by Xero users, and how to avoid them. Let’s take a look.

1. Reconciling Incorrectly

When entering your bills into the Xero purchases section make sure to mark these bills as “paid” instead of entering the bills to then re-enter them in the reconciliation section. This is a frequent mistake made by many Xero users. Bills to pay are entered as they’re received, while payments are made either manually or are directly debited from your bank account. Once you reconcile the bill, it doesn’t get marked “paid,” instead a new transaction gets generated.

2. Assuming Your Emails Are Stored

The emails you send using Xero are not stored on the software! While a note about the email sent is saved in your history & notes section, the entire contents of your email are not saved. If you send generic emails dealing with a large number of transactions, then you’re good to go. If not, and you want to keep a copy of what you sent, then you simply have to opt for a copy of the email to be sent to your email address registered with Xero.

3. Not Using Expert Help

The idea of Xero being in the cloud is to provide users access to experts. This enables individuals to get help while working on their data and receive advice on their financial position. Most users wait to get in touch with their accountants to get an idea on how to carry their business forward. Using this feature eliminates the need to do that, and makes the process swifter! These advisors are certified with Xero to help you identify pressing issues, setting goals, monitoring progress and developing strategies!

4. Not Understanding the Differences In Terminology

Every system defines certain terms in a unique manner. While debits and credits seem like an international accounting language, terminology gets affected by various factors. Similarly, in Xero, you need to familiarize yourself with certain terms to ensure you’re on top of things. There is an option to override some default terminology, but the option isn’t always available, so getting a hang of what means what is really your best solution.

5. Keeping Old User Accounts

There is no need to keep unnecessary data! When you no longer need a Xero file, the best way to take access away is by deleting it right away. While your business isn’t really at any harm from someone keeping access to your old accounts, it’s still in your best interest to be cautious and remove their access. As they say, it’s better to be safe than sorry!

6. Not Making Use of Demo Company

Demo company is a feature offered by Xero that lets you make a demo account and practice before running the live one! However, since Xero hasn’t advertised this enough, a lot of the users are unaware of any such feature existing. Running a demo is the best way for you to practice transitions or processes before putting them into the live XERO file. Run reports and see if they work, and practice reconciling the bank!

7. Not Realizing the Subscriber Owns the Data

Your data is owned by the partner you pay your Xero subscription to! According to Xero’s legal framework, the subscriber owns the data, and should they choose to sell their business, they would sell on the subscriptions, and hence your data! If the new owner does not pay the bills, your files will get permanently deactivated. This is something that needs to be highlighted and understood by all users!

8. Thinking Xero Is Your Old System

While not quite literally, most people expect the new system to be similar to, if not the same as, their old one. This is a mistake that makes transitioning to Xero harder than it should be. If you previously used a paper-based system, or another accounting system, understand that things are going to be a little different now. Instead of trying to get Xero to function the same way as you’ve been functioning before, invest time in learning the new processes and getting to know the system.

About the author

Karen Watson

Karen is a professional bookkeeper who loves numbers and her job. She currently works for Balancing Books Bookkeeping and enjoys helping her clients. In her spare time, she spends time with her husband traveling and loves to read.

4 Comments

Tip number 7 needs elaboration and makes very little sense the way it is worded, in fact it seems to contradict itself from one sentence to the next – repeatedly. For instance it starts with:
“Your data is owned by the partner you pay your Xero subscription to!”
But then:
“According to Xero’s legal framework, the subscriber owns the data”
So which is it? And then it just gets more confusing from there.

In our daily business life, Email is very important. Therefore your #2 point is very important. Because if the emails are not stored then it can be a very big problem in the future. The article is very nice and informative. It will create awareness among the people about this 8 XERO Mistakes.